- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 1. Fixed-Income Instrument Features
- Subject 1. Basic Features of a Fixed-Income Security
CFA Practice Question
Given that a 6%, 15-year, $100,000 mortgage has a payment of $843.86 per month, what is the amount of the interest component of the first monthly payment?
B. $500.00
C. $600.00
A. $400.00
B. $500.00
C. $600.00
Correct Answer: B
Interest component = monthly rate x outstanding balance
User Contributed Comments 7
| User | Comment |
|---|---|
| pangar04 | Can someone explain how you get this answer? sorry im confused |
| abeeman924 | Simple interest payment calculation just use 12 months instead of semi-annual. $100,000 x 0.06 = $6,000 $6,000/12 (months = $500 worth of interest per month on your mortgage payment The other $343.86 out of the total $843.86 is a return of principal. |
| Yrazzaq88 | 0.06 / 12 = 0.005 0.005 x 100,000 = $500 per month |
| mbowa | Thanks abeeman924, i was confused as well |
| lal191561 | nice questions |
| raulmartin | Thanks for the help |
| thevinu | Think of this bond to consist compounded interest, hence we need to calculate the first initial coupon given on the initial PV of $100,000. Hence $100,000 * 6% = $6,000 / 12 (to get the coupon per month) = $500. |